Buying a Business Vehicle at Year-End
Posted on Friday, December 18, 2020
ShareIs your business considering purchasing additional vehicles? Now may be the time to do so.
For small businesses, tax planning is a vital piece of the business process. Many businesses fail to take advantage of important tax planning opportunities at year-end. Using favorable depreciation regulations to your advantage by purchasing vehicles or equipment at year-end is one strategy that can help taxpayers save on their annual tax bill.
Machinery and equipment placed in service during the tax year are eligible for 100% bonus depreciation. Vehicles placed in service during the tax year are subject to some special rules. Rev. Proc. 2020-37 sets the first-year depreciation limit at $18,100 for a passenger automobile placed in service in 2020. However, there is an exception to this rule which will allow you to take 100% bonus depreciation on a vehicle.
Vehicles with a gross vehicle weight rating (GVWR) of 6,000 pounds or more are not subject to the limit on first-year depreciation. Trucks and vans are more likely to escape depreciation limits because they use a loaded GVWR, as opposed to an unloaded GVWR for passenger automobiles. A sample of the vehicles that meet the 6,000 pound test is listed below. More comprehensive lists can be found at websites such as www.autobytel.com, www.motortrend.com, and www.carsdirect.com.
- Chevrolet – Express (2500 & 3500), Silverado (1500, 2500HD, 3500HD), Suburban, Tahoe, Traverse
- Ford – Expedition, Explorer, F-150, F-250, F-350, F-450
- GMC – Acadia, Savana (2500 & 3500), Sierra (1500, 2500HD, 3500HD), Yukon
- Toyota – 4Runner, Land Cruiser, Sequoia
- And many more…
Don’t hesitate to reach out to your DWD professional advisors to help with your year-end tax planning needs. Contact us today!
Contributed by: Jessica Ogle, CPA | Partner | DWD CPAs & Advisors
Posted in Tax And Accounting Topics For Business
Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.